Can my dau open a sole proprietor business on her personal taxes & still be a dependent on her parents?

[jacquedodds]

"My daughter who is a 20y, FT college student & our dependent, just told me she wants to be able to claim her expenses for her side jobs of photography shoots & videography. That's what she's attending school for but these paid jobs are outside of her required college assignments. She also has a couple W-2s for income for 2016. Can she open a sole proprietor business on her personal taxes to claim her expenses and still be a dependent on ours? Or would we add her income to ours along with her sole proprietor business & associated claimed expenses?"

[MinhT · Accepted solution]

Yes, she can start her own business as a sole proprietorship even if she is your dependent.

As a business owner, she can file her own tax return to report her business income and expenses. She will indicate on her return that she is claimed as a dependent by someone else.

If and when she earns enough money from her business and her other jobs to pay for more than half of her support, she will cease to be your dependent.

[jacquedodds]

How exactly do I know if & when she is earning half of her support? Is there a particular amount to go by or do I need to add up and compare all my expenses I paid toward/for her & her income plus her expenses she paid?? Or do we ballpark it and make a decision?

[MinhT]

The IRS has a worksheet for determining support that you can use: <a rel="nofollow" target="_blank" href="https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf...>